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This is an update to my previous post regarding a problem at OptionsXpress I wrote about. The problem is the account balances page is displaying initial margin requirements for open positions that are ten times the correct requirements in excess of the net liquidating value of the account and freezing the account.

I still have an account at OX (though I am not sure for how much longer) and the initial margin for my positions look to be correct. If I remember correctly OX had issues with inflating initial margin for short options in certain markets in the past (I believe KC was one).

@rleplae just posted an interesting Tasty Trade video in his journal that discuss's the VIX and a short ES option strategy over the last 13 years. Interesting (and quick) watch for all you ES Option sellers.

"Can you stay in this strategy with that amount risk" Tom - I couldn't, Tony - I can't - Kudos to Ron for sticking to his strategy even with periods of possible major drawdowns.

"When we have high IV in the market things play out better" During this period of low IV it is tough without taking on too much risk. Karen mention this in her interview in Aug 2014. Avg credit were more than double in 2008 when volatility was high. I can remember premiums doubling in a matter of days in Sept 2008

This study was on the SPX which requires more margin, with the /ES the return would have been higher but the losses would have been more also

I have been wondering why the ES put option strategy has far fewer losing trades than any other commodity. I think I have found out why.

I have been using delta to pick the strike of the option to sell. Looks like that doesn't tell the true story about risk of futures moving enough and forcing you out of your option.

Using the OX Standard Deviation (STD) calculator, (on Trade Calculator page under Probability Chart tab) I looked at what the future's price was for 2 STD and then looked up the puts and calls for a few popular commodities (I wanted to do SB & KC but OX wouldn't let me do those. Data fees? Anybody know where I can get 2 STD for them for Sep or Oct futures?).

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What I found was that at 2 STD most options had little value and were not worth selling. Only ES puts were > $100.

GC was worth $100 for the put but I don't trust selling a GC option that is only 263 OTM when there were a couple of 200 drops in < 30 days in 2013. That big a drop would have (and did for me) cause a huge loss.

So the reason that the ES put strategy has such a high winner rate is that you can sell at a higher, safer STD and make a decent ROI and you can't do that in other commodities.

I can't believe that I just found out there is Probability Chart tab under the OX Trade Calculator page. Thanks Ron.

ron99

I have been wondering why the ES put option strategy has far fewer losing trades than any other commodity. I think I have found out why.

I have been using delta to pick the strike of the option to sell. Looks like that doesn't tell the true story about risk of futures moving enough and forcing you out of your option.

Using the OX Standard Deviation (STD) calculator, (on Trade Calculator page under Probability Chart tab) I looked at what the future's price was for 2 STD and then looked up the puts and calls for a few popular commodities (I wanted to do SB & KC but OX wouldn't let me do those. Data fees? Anybody know where I can get 2 STD for them for Sep or Oct futures?).

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).

What I found was that at 2 STD most options had little value and were not worth selling. Only ES puts were > $100.

GC was worth $100 for the put but I don't trust selling a GC option that is only 263 OTM when there were a couple of 200 drops in < 30 days in 2013. That big a drop would have (and did for me) cause a huge loss.

So the reason that the ES put strategy has such a high winner rate is that you can sell at a higher, safer STD and make a decent ROI and you can't do that in other commodities.

I can't believe that I just found out there is Probability Chart tab under the OX Trade Calculator page. Thanks Ron.

If you use TOS there are Probablitity of ITM, Probability of OTM and Probability of Touching that can be used in the option chain.
Just click on the the bottom right edge of the top column and a drop down menu will appear. It is under option theorecticals and greeks

What happened to the ES around September/October of last year? It had a massive drop over the course of 30 days, almost 200 points from 2015 to 1813. Reason I ask is that people keep saying the S&P hasn't had a 10% drop or correction in years but that looks like 10% in my book. Did I miss something now that I'm a canuck?

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Thanks,
/rsm005/

The S&P drop almost 6% in matter of 6 days in December but rebounded on the 17th, consecutive down days happen quite often even in this low period of volatility

Question. I don't have the know to conduct any back tests or get the old data for this. During the Sept/Oct swing down would you have been pushed out of the position due to a margin call? My thought is if that dip can be held then the only thing that I can see forcing an exist is an actual correction in the S&P, but I don't want to get ahead of myself.

Also you mentioned running an analysis of ES against the VIX earlier. Would you be comfortable sharing the results?

Question. I don't have the know to conduct any back tests or get the old data for this. During the Sept/Oct swing down would you have been pushed out of the position due to a margin call? My thought is if that dip can be held then the only thing that I can see forcing an exist is an actual correction in the S&P, but I don't want to get ahead of myself.

Also you mentioned running an analysis of ES against the VIX earlier. Would you be comfortable sharing the results?

Thanks
/rsm005/

TOS has an analyze tab where simulated trades can be added to look at the risk profile, probability analysis, and thinkback. The price can be adjusted on the simulated trade that shows the maintenance or margin required.

TOS has an analyze tab where simulated trades can be added to look at the risk profile, probability analysis, and thinkback. The price can be adjusted on the simulated trade that shows the maintenance or margin required.

A bit too good to be true I'm afraid. When I punched in /ES saw all the previous numbers but none of them strikes are tradeable. I'll have to ping their support folks next week to see what the deal is. The "buy/sell" options are simply gray'd out. Other options, stocks for example, seem to work fine.